Exhibit 10-b
PRIVATE LEASE CONTRACT FOR A RAILROAD COMPLEX, BETWEEN
FERROCARRIL NACIONAL DE HONDURAS /Honduran National Railroad/
AND TELA RAILROAD COMPANY. We, Norberto Torres, of legal age,
married, a civil engineer, a Honduran, domiciled in this city,
acting in my capacity of General Manager and, as such, as
Administrative, Legal and Extrajudicial Representative of
Ferrocarril Nacional de Honduras, an autonomous entity of the
state of Honduras with legal status, its own assets and
indefinite term, created by Decree Number Forty-Eight, issued
by the National Congress on the thirtieth day of April,
nineteen hundred fifty-eight, whose Article Thirty-three sets
forth that this institution shall be represented by its
General Manager, with sufficient powers for this type of acts;
and in accordance with the Certification of the Sole Point of
Minutes Number 543, of the meeting of the Board of Directors
of said Autonomous Entity, dated the twenty-eighth day of
February, nineteen hundred ninety-four, which shows the
election of the declarant, Mr. Norberto Torres, as General
Manager of Ferrocarril Nacional de Honduras, who occupies said
function and is authorized to execute this contract, as arises
from the Certification of the Sole Point of the special
meeting of the Board of Directors No. 548 of the fourth day of
January, nineteen hundred ninety-six. For the purposes of this
contract, Ferrocarril Nacional de Honduras shall be
hereinafter referred to as "THE LESSOR," and, as party of the
other part, Mr. Arnoldo Manuel Palma Isaacs, of legal age,
married, a business agent, of Panamanian nationality, with
legal residence in Honduras and domiciled in the city of La
Lima, Department of Cortes, in transit in this city, who
appears as General Representative of Tela Railroad Company, a
joint stock company incorporated and existing pursuant to the
laws of the State of Delaware, United States of America,
located in the city of Wilmington in said State, which was
acknowledged as a legal entity, and authorized to do business
in the Republic of Honduras, under decision issued by the
Executive Power through the Ministry of Government, Justice
and Health on the twentieth day of February, nineteen hundred
thirteen. For the purposes of this contract, Tela Railroad
Company shall be hereinafter referred to as "THE LESSEE." The
declarant, Mr. Arnoldo Manuel Palma Isaacs, proves the
capacity in which he appears with the public instrument of
substitution of general power of attorney, authorized in the
city of La Lima, Department of Cortes, by Notary Pompilio
Amador, and registered under number twenty-five (25) of Volume
forty-four (44) of the Commercial Register of San Pedro Sula.
Said instrument of general power of attorney grants sufficient
powers for the representative to sign all types of
instruments, contracts and agreements. And, after I verified
that the declarants are in full enjoyment of their civil
rights, they freely and spontaneously declared: FIRST: "THE
LESSOR" and "THE LESSEE" declare that: On the twenty-ninth day
of December, nineteen hundred ninety-four, under private
document accepted and signed by both parties, they executed an
Agreement for Temporary Lease of a Railroad Complex, for
theterm of one year, counted from the first day of January,
nineteen hundred ninety-five; On this date, and in the absence
of any non-compliance or outstanding debts of the parties
under the lease contract which expired on December 31,
nineteen hundred ninety-four, they terminate, by mutual
agreement, the aforementioned Lease of the Railroad Complex
and, pursuant to Clauses 3 and 4 of the Agreement, and item F)
of the Second Clause of the aforementioned Lease Contract,
"THE LESSEE" returns to "THE LESSOR" the assets of the
Railroad Complex, railroad lines, yards, branch lines, tracts,
sections, bridges, rights-of-way, equipment and installations
set forth in the contract expired in December 1994, and the
respective inventories, and "THE LESSOR" receives them to its
full satisfaction. SECOND. "THE LESSOR" declares that: It is
the legitimate owner of the following assets: A) Railroad line
connecting and passing through the following points: 1. From
the Town Hall to the city of El Progreso, on a distance of
eighty-four kilometers and six hundred eighty thousands of a
kilometer (84.68 km), including its yards, branch lines,
tracts, sections, bridges, and also the railroad yard of Tela.
2. From the city of La Lima to Baracoa, on a distance of one
hundred thirteen kilometers and nine hundred twenty thousands
of a kilometer (113.920 km), including its yards, branch
lines, tracts, sections, and bridges; with a total of one
hundred ninety-eight kilometers and six hundred thousands of a
kilometer (198.600 km), including the yard lines found in
Puerto Cortes. Both lines, their branch lines and sections,
are on the respective dormers, embankments, bridges, and their
respective right-of-way. B. "THE LESSOR" also owns the rest of
the principal lines, branch lines, tracts, and railroad
structures connected with those described above, as well as
all railroad lines and railroad yards of the country. C) Other
railroad assets described in the enclosed inventory, which is
also signed by the contracting parties and is an integral part
hereof. THIRD. "THE LESSOR" continues and declares that the
assets described in the Second Clause, items A and C, above,
are leased to "THE LESSOR" and also constitute an easement for
transit to the installations of the railroad complex described
in paragraph b) of the Second Clause, under the following
conditions: a) In transport operations for its business, "THE
LESSEE" shall be entitled to use and operate exclusively all
the assets of the Railroad Complex described in items A and C
of the Second Clause of this instrument; however, concerning
transit by the railroad lines described in item A of said
Clause, "THE LESSEE" shall have preferred use and operation at
its discretion, through its control office, in the facilities
described under item B of the Second Clause. "THE LESSEE"
shall be entitled to share the easement with "THE LESSOR" or
with third parties, to which the latter grants right-of-way
after compliance with the formalities set forth herein. In
order to avoid delaying the operations of both parties,
transit by the facilities described in item B, second clause,
shall be regulated by "THE LESSOR" through its control office,
and must give preference to the banana transport traffic of
"THE LESSEE," its affiliates, and other producers, since this
is a perishable product. B) "THE LESSEE" shall pay an annual
rent for the lease and easement set forth in this clause, in
the amount of TWO HUNDRED SEVENTY-FIVE THOUSAND U.S. DOLLARS
(US$ 275,000.00). The agreed annual rent shall be paid at the
offices of Ferrocarril Nacional de Honduras in San Pedro Sula,
Department of Cortes, in Lempiras at the valid rate of
exchange established, or by consultation with the Central Bank
of Honduras within the first five business days of each month,
in equal monthly installments paid in advance. In the first
year of the lease, "THE LESSEE" shall pay in advance,
according to a disbursement schedule to be presented to the
Board of Directors, an amount of up to SIXTY THOUSAND U.S.
DOLLARS (US$ 60,000.00), in the equivalent in Lempiras
thereof, to be disbursed and deposited in a special account
with the Central Bank of Honduras in the name of Ferrocarril
Nacional de Honduras, the funds whereof shall be used for the
rehabilitation of the equipment and railroad, so that it may
operate as an independent, self-financing enterprise; FORTY-
FIVE THOUSAND U.S. DOLLARS (US$ 45,000.00) in the equivalent
in Lempiras thereof, shall be paid to Ferrocarril Nacional de
Honduras at its offices in San Pedro Sula, when signing the
contract. The balance of the rent for the first year, i.e. ONE
HUNDRED SEVENTY THOUSAND U.S. DOLLARS (US$ 170,000.00) shall
be paid to Ferrocarril Nacional de Honduras in equal monthly
installments, paid in advance, without need for collection
formalities or any requirement, in the Lempiras equivalent
thereof, at the valid rate of exchange established, or by
consultation with the Central Bank of Honduras. In subsequent
years, the annual rent shall be paid as follows: The
equivalent of TWO HUNDRED FIFTEEN THOUSAND U.S. DOLLARS
annually (US$ 215,000.00/YEAR) shall be paid in equal monthly
installments paid in advance to Ferrocarril Nacional de
Honduras, and the equivalent of SIXTY THOUSAND U.S. DOLLARS
annually (US$ 60,000.00/YEAR) shall be disbursed to the order
of Ferrocarril Nacional de Honduras, to be deposited in a
special account with the Central Bank of Honduras, which fund
shall be used for the rehabilitation of the equipment and
railroad lines. c) This Contract of Lease and Easement is
executed under the method of automatic extensions for a period
of three years beginning as of the first day of January,
nineteen hundred ninety-six, whereas automatic extension is
understood as the maintenance of the same validity term of the
contract at the end of each operative year without need for a
new contract or agreement of the parties. However, this lease
may become with limited term if either party so notifies the
other in writing, in which case its term shall be three (3)
years beginning as of the first day of January of the year
following said notification. ch) If, due to reasons of
economic competition in railroad operations, equipment or
system obsolescence, severe deterioration of the tracks,
requirement for a new transport method, and other similar
situations, "THE LESSEE" cannot continue to use the railroad,
it may notify in writing about its wish not to continue the
lease and easement, in which case they shall expire on
December 31 of the year following the notification. d) Under
normal conditions, the parties shall not be entitled to
request, nor to obtain, a reduction of the rates and periods,
nor immediate termination of the contract, with the following
exceptions: due to events of force majeure or act of nature
duly proven by a competent authority; due to government
political actions making necessary the reduction or
termination of the activities of "THE LESSEE" in the country,
due to operating conditions and provisions imposed by "THE
LESSOR," and making impossible or delaying the operations of
"THE LESSEE," or in the cases allowed by the law. e) During
the term of this contract, "THE LESSEE" must perform, for its
account and risk, the maintenance of the RAILROAD COMPLEX
leased by it, so as to conserve it in normal operating
condition, except for normal tear and wear arising from
legitimate use. Without prejudice to the above, "THE LESSOR"
shall timely formulate measures and indications to improve
said maintenance, and "THE LESSEE" shall be obligated to
comply with said indications, if they are technically and
economically reasonable. The maintenance referred to in this
clause shall be performed according to annual schedules agreed
upon by both parties, and periodically and discretionally
supervised by "THE LESSOR." These schedules shall be reviewed
by both parties, as the need arises. Furthermore, they agree
that the maintenance and repair of the lines from Puerto
Cortes to Baracoa and Tela - 45 1/2, on which a transit
easement is instituted, shall be the responsibility of "THE
LESSEE" concerning execution and cost, provided the need for
such works arises from the use of these lines and tracts by
"THE LESSEE." To guarantee the physical preservation of the
leased RAILROAD COMPLEX, "THE LESSEE" shall protect the
related lines with fire and/or lightning insurance, against
material damages caused by earthquake, hurricane, typhoon,
tornado, cyclone, wind, storm and/or hailstorm, and material
damages due to flood and/or tidal wave. Said insurance shall
be paid by "THE LESSEE," and must be in force for the entire
term of the lease and its extensions. f) At the end of this
Lease Contract and its extensions set forth in this clause, or
upon its termination due to any legal contractual cause, "THE
LESSEE" shall return the RAILROAD COMPLEX to "THE LESSOR" in
normal operating condition, except for normal tear and wear
arising from legitimate use. The determination of the normal
operating condition and of the normal tear and wear caused by
legitimate use of the RAILROAD COMPLEX, and its repair
expenses, shall be evaluated by "THE LESSOR" and, in the event
of disagreement with "THE LESSEE," the difference shall be
submitted to decision by two (2) experts appointed one by each
party; if the experts do not agree, the parties, by mutual
consensus, shall appoint a third arbitrator, appointed by
mutual consent by the two experts of the parties. The
arbitrator shall decide with the other two, and shall issue
the verdict by resolution with simple majority. If the first
two do not agree on the appointment of the third, the parties
shall be free to resort to competent judicial authorities in
order to enforce their rights. Between the onset of the
disagreement between the two appointed experts and the final
decision with the intervention of the third expert, no more
than sixty business days may lapse; experts' costs shall be
paid by the parties. g) During the term of this Lease
Contract, "THE LESSEE" shall be entitled to fully or partially
modify, for its own account and risk, the current system of
railroad transport of bananas, after decision and written
agreement with "THE LESSOR." It shall be understood that "THE
LESSOR" agrees with the modification in the following cases:
1) In the event of modification of the hauling system, due to
a change in fruit transport method. In this case, the
materials remaining after making the modification shall be
delivered to "THE LESSOR." 2) In the event of change in the
size of the pallets, motivated by a change in the size of the
containers. 3) In the event of change in the engines of the
locomotives, tending to improve or extend their useful life.
4) Any other change in the system of the equipment and
installations designed to facilitate or improve fruit
transport by railroad. It is understood that these changes may
not, in any case, impair the structure of the equipment and
installations, according to the written opinion of the
technicians of both parties. h) "THE LESSOR," as owner of the
leased RAILROAD COMPLEX, shall be entitled to transit,
regulated by the control office of "THE LESSEE," with its
equipment and personnel, by the rail road lines, branch lines
and tracts included in the leased RAILROAD COMPLEX. Transit by
third parties authorized by "THE LESSOR" to operate on the
leased lines and lines under easement maintained by "THE
LESSEE" shall take place after agreement, without prejudice to
"THE LESSEE'"s right to request special conditions for this
service. i) "THE LESSOR" shall be liable for the cost of
damages, interference and losses caused by its operations on
the leased lines. j) At the end of this Contract and its
extensions, "THE LESSOR" shall have preferred right to
purchase all or part of the spare parts found warehouses,
which "THE LESSEE" wishes to sell, and which are necessary for
the operation of the RAILROAD COMPLEX; such purchase shall be
made at the book value of "THE LESSEE" in Honduras; k) "THE
LESSEE" shall have the right to assign this Lease and Easement
Contract, or to sublease the RAILROAD COMPLEX, totally or
partially, to the individual or corporation it deems
convenient, and which was previously accepted and approved for
this purpose by F.N.C. de H. In these cases, the assignee or
sublessee shall assume the same obligations, and shall have
the same rights held by "THE LESSEE." FOURTH. In turn, "THE
LESSEE" declares that: It accepts the lease and easements of
the RAILROAD COMPLEX granted by "THE LESSOR," under the terms,
periods and conditions set forth, and pledges to pay and
comply punctually with the obligations undertaken hereunder.
FIFTH. "THE LESSOR" declares that: It grants easement to "THE
LESSEE," so that the latter may maintain and use, in crossed
and parallel lines, in the leased easement, and in that
returned, the roads, channels, irrigation ditches, telephone
and electricity lines, water and oil pipelines, irrigation and
drain systems, cableway systems for the transport of bananas
to packing stations, whereby "THE LESSEE" must take all
necessary steps so that, in the enjoyment of this easement,
and especially in the returned one, no damage is caused to the
use of crossed and parallel lines by "THE LESSOR. "THE LESSOR"
acknowledges that "THE LESSEE" has built, and currently
maintains, in various locations, within the easement
corresponding to the leased railroad lines, and in the
easement of the returned railroad lines, installations such
as: telephone and electricity lines, fruit packing stations,
irrigation pumps, roads, cultivations, channels, irrigation
ditches, water and oil pipeline systems, irrigation and drain
systems, and fruit transport by cableway, and buildings all
these installations are related to its agricultural
activities. Consequently, it grants it the right, as long as
these installations are maintained operational, to continue to
occupy said easement with such installations. After agreement
with "THE LESSOR," "THE LESSEE" may build new installations of
this type, related to its agricultural activities, within the
aforementioned easements. Furthermore, "THE LESSOR" grants to
"THE LESSEE" the right to continue using for its land
vehicles, as long as these installations are maintained
operational, the railroad bridges habilitated in the leased
Railroad Complex and in the returned one. The maintenance and,
if applicable, the rehabilitation and reconstruction of these
bridges, if they are used and required by "THE LESSEE" for its
land operations, shall be for the account of "THE LESSEE." All
easements and rights granted by "THE LESSOR" to "THE LESSEE"
in this Fifth Clause, shall be at no cost for the latter, and,
at the end of this Contract or of its extensions, they may be
renewed under the same conditions, after agreement between the
parties. SIXTH: "THE LESSEE" declares that: It accepts the
easements and rights granted by "THE LESSOR" in the previous
Clauses, and for the appropriate legal purposes, we sign this
Lease Contract, while the respective Public Instrument is
being drawn up under the same terms and conditions. In the
city of La Lima, Department of Cortes, on the eleventh day of
January, nineteen hundred ninety-six.
/Seal and signature/ /Signature/
NORBERTO TORRES ARNOLDO MANUEL PALMA ISAACS
/Signature/ /Signature/
WITNESS WITNESS WITNESS
CERTIFICATE OF ACCURACY
Deniza Kudish hereby affirms that she is a professional
translator, domiciled at 305 W. 28th St., Apt. 18-G, New York,
New York 10001, and that she is thoroughly familiar with the
Spanish and English languages, and that she translated the
attached contract entered into between Tela Railroad Company
and Ferrocarril Nacional de Honduras [the Honduran National
Railroad] from the Spanish language into the English language,
and that the attached text is a true and correct translation
of the original, to the best of her knowledge and belief.
/signature/
Deniza Kudish
This 19th day of March, 1996